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HomeEthereumNFT'sDebt crisis threatens liquidation of Bored Ape and CryptoPunks NFTs worth $55M

Debt crisis threatens liquidation of Bored Ape and CryptoPunks NFTs worth $55M

  • Crypto Twitter users are concerned about a potential liquidation cascade in the NFT market as a large number of Bored Ape Yacht Club NFTs used as collateral is nearing its liquidation point.
  • With BendDAO, users can borrow ETH against NFTs posted as collateral.
  • Bored Ape Yacht Club, CryptoPunks, and Azuki are just a few of the high-value, blue-chip NFTs that BendDAO deals with exclusively.

A major liquidation could be on the horizon for the NFT market.

Thousands of holders of NFTs are taking out ETH loans using BendDAO’s web3 lending protocol. A BAYC whale (Bored Ape Yacht Club) borrowed over 10,000 ETH from the platform, escalating liquidation fears.

NFTs worth $60 million (over 30,000 ETH) are currently being used as collateral on BandDAO, and the number is growing every hour. BAYC and MAYC (Mutant Ape Yacht Club) collateral account for almost 85% of loans.

BendDAO

The BendDAO platform allows peer-to-peer lending for NFTs. The platform allowed users to deposit Bored Ape NFTs as collateral and borrow up to 40% of their value.

A mass liquidation event could occur as the floor price for the BAYC collection has dropped to the low 70’s in ETH.

Health Factor

Using a term called ‘health factor’, BendDAO calculates the likelihood of liquidation. This represents the safety of a user’s deposited NFT against the loaned ETH value. As soon as the health factor reaches 1, the deposited assets are put up for auction by the platform. The platform currently has 45 BAYC with a health factor below 1.2. 

ApeCoin, the native token of the BAYC ecosystem, was trading at $5.61, down 8.6% over 24 hours.  

Read: NFT’s 2.0: Beyond JPEG’s

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